Redfin Takes A Hit In 2022, Is The Company's Goal Of Profitability In 2023 Realistic?

Redfin Corp RDFN reported a year of losses and declining gross profits in its year-end earnings report for 2022.

The results, published Thursday, come as a reflection of the nationwide chill that hit the U.S housing market last year, caused by rising interest rates that kept many prospective homebuyers from entering the market.

Redfin took drastic measures in the latter part of 2022 — it closed down its home-flipping division and laid off 13% of its workforce in a bid to reduce overhead costs. However, those measures were not enough to prevent the company from reporting a net loss of $321 million in 2022, more than double its $110 million loss in 2021.

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By The Numbers: Although the company reported revenues of more than $479 million, above the consensus of $448.07 million, it posted a loss of $1.09 per share, falling short of the expected loss of $1.08 per share.

The company's losses were primarily from its properties section of the business, which included the flipping operation, RedfinNow.

In this division, the company reported a net loss of $62 million. RedfinNow had to offload 19 remaining homes at the end of the year, according to CEO Glenn Kelman. Despite selling a total of 2,044 RedfinNow homes in 2022, the company's gross profits declined by 29%, though its total revenues increased by 19% year over year to $2.3 billion.

The Goldman Sachs Analyst: Michael Ng maintained its neutral rating, but raised the price target from $4.50 to $5.

Ng told investors that Redfin’s optimism and reiteration of its goal to be profitable in 2023 and 2024 will be met with challenges.

Redfin said to achieve its goal, the company plans to benefit from a series of measures, including the exit of its Redfin Now business, right-sizing its workforce, and an increase in revenue per brokerage transaction due to the elimination of the buyer refund.

However, Ng notes that the housing market outlook for 2023 remains uncertain, and with Redfin’s revenue growth coming from mortgage and title rates, the company’s overall profitability is significantly exposed to the Federal Reserve’s interest rate campaign.

Price action: Shares of Redfin are trading 8.32% lower Friday to $8.26, according to Benzinga Pro.

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